The average person depends on Social Security for their retirement benefits. We all pay money toward our Social Security benefits whenever we work for someone else or operate our own business. These benefits are available to us at age 62, or you can choose to receive them at age 65 or 67 and receive a higher monthly payment.
However, it is not a good idea to depend on Social Security alone for your retirement. The cost of living increases by their year and you will never be able to afford your living expenses if you are only dependent on Social Security. For this reason, it is imperative that you invest for your retirement in other ways.
The most popular retirement investment plans are 401(k)s and Roth IRAs. They can help you save money for your retirement while paying fewer taxes on your income int eh process. Each type of account is structured differently, so one may be better than the other for you.
Some employers offer a 401(k) retirement account to their employees. If you sign up for a 401(k) account, a small percentage of your paycheck will automatically get deposited into it. But what is truly beneficial is that your employer will pay the same amount of money into your 401(k) account that you pay into it.
The money that sits in your 401(k) account is invested in various stocks and mutual funds, such as Vanguard Total Stock Market Index and Fidelity Advisor Technology Fund. There is the potential to lose money from these investments, but they are considered to be medium-risk investments.
By the time you reach 59 ½ years old, you may withdraw from your 401(k) account without paying any penalty fees. If you withdraw money before your 59 ½ years old, then you must pay 10% of your earnings as well as income taxes on the money you withdrew.
An individual retirement account (IRA) allows you to invest in securities and enjoy some generous tax benefits. If you choose a Roth IRA account, then you don’t have to pay income taxes on the money that accumulates in the account from your investments. Income taxes are only charged on the money that you initially deposit into the account. After that, all your earnings are tax-free.
You cannot deposit more than $6,000 per year into a Roth IRA account. But if wise investments are made with the account, then you could potentially earn many thousands of dollars over the next couple of decades and never pay taxes on those earnings. That is why Roth IRAs are so popular.
Purchase Your Own Income Properties
Buying a second home on your own offers the promise of the greatest return on your investment if you treat it as an Income property With an expert real estate agent helping you find the right property, the rent will cover the home’s mortgage and provide you with an additional monthly income—all while the home increases in net worth.
Invest in a Real Estate Investment Trust (REIT) or Mutual Fund
Purchasing an investment property may be one of the best prospects, but it’s certainly not your only option for putting your retirement money to work in the real estate market. Two alternatives are investing in a Real Estate Investment Trust (REIT) or Real Estate Mutual Fund.
Your Other Option For Retirement Investing: Real Estate Mutual Funds
One step away from REITs are Real Estate Mutual Funds. Essentially, these operate as just a standard mutual fund with a focus on investing in multiple REITs and other real-estate related stocks. This extra layer of removal means your investment is more diversified, which means even lower risk as well as the potential for an even lower dividend percentage.
Understanding Reverse Mortgages as a retirement strategy
Home equity is the largest asset of American families. Both retirees and their financial advisers may not understand that a reverse mortgage is a retirement strategy,” she says. “The Home Equity Conversion Mortgage (HECM) is the Federal Housing Administration (FHA)’s reverse mortgage program that allows qualified retirees to stay in their own home by withdrawing some of the home equity. The two other major misconceptions noted by Dr. Chien are the ideas that “you need $1 million to retire,” and “you should take Social Security benefits as soon as you qualify.”
These are just a few ways you can invest in your retirement. It is essential that you get started as early as possible while you still have time to accumulate a maximum amount of earnings.